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iFOREX Daily Analysis : August 29, 2016

Published 08/29/2016, 05:31 AM
Updated 09/16/2019, 09:25 AM

The U.S. dollar skyrocketed against a basket of major currencies on Friday, following comments from two top Federal Reserve officials that hinted at a potential U.S. interest rate hike as early as next month.

During a much-awaited speech at the Fed's Jackson Hole symposium Friday, Fed Chair Janet Yellen said the case for U.S. interest rate hikes has “strengthened” in recent months due to improvements in the labor market and to expectations for solid economic growth. Speaking shortly afterwards, Fed Vice Chair Stanley Fischer said Yellen’s speech was “consistent” with expectations for possibly two more rate hikes this year, opening the door to a September hike. Fischer also said the Labor Department's jobs report for August will likely weigh on the decision over a hike.

In the week ahead, investors will focus on U.S. economic reports, with Friday’s nonfarm payrolls data in the spotlight. Elsewhere, in China, market players will be looking out for data on the country's manufacturing sector, amid ongoing concerns over the health of the world's second biggest economy. Meanwhile, in the U.K., traders will be awaiting reports on activity in the manufacturing and construction sectors for further indications on the continued effect that the Brexit decision is having on the economy.

EUR/USD

The euro slipped 0.77% on Friday, to settle at 1.1195, the lowest level since August 16, after Federal Reserve Chair Janet Yellen's upbeat comments on the U.S. economy prompted traders to raise their expectations of an interest rate increase. On the week, the euro lost 1.13% against the dollar, snapping a two-week win streak.

Today markets in the U.K. are to remain closed for a national holiday, while the U.S. is to release data on personal income and expenditure.

EUR/USD ChartPivot: 1.1255Support: 1.1165 1.1145 1.113Resistance: 1.1255 1.128 1.131Scenario 1: short positions below 1.1255 with targets @ 1.1165 & 1.1145 in extension.Scenario 2: above 1.1255 look for further upside with 1.1280 & 1.1310 as targets.Comment: the RSI lacks upward momentum.

Gold

Gold prices flipped between gains and losses on Friday, before ending little changed, as markets assessed the likelihood of an interest rate hike at the next Federal Reserve meeting September, following comments from the top two officials at the central bank.

Despite Friday's modest gains, the yellow metal ended with a weekly loss of $20.30, or 1.5%, the biggest decline since mid-July.

In the week ahead, metal traders will focus on U.S. economic reports, with Friday’s nonfarm payrolls data in the spotlight, but also on China’s data on manufacturing sector, amid ongoing concerns over the health of the world's second biggest economy.

Gold ChartPivot: 1324.4Support: 1309.5 1304.5 1298Resistance: 1324.4 1331.25 1340Scenario 1: short positions below 1324.40 with targets @ 1309.50 & 1304.50 in extension.Scenario 2: above 1324.40 look for further upside with 1331.25 & 1340.00 as targets.Comment: the RSI broke below a bullish trend line.

WTI Oil

Oil futures managed to hold on to modest gains on Friday, but suffered a decline for the week, after the Saudi energy minister shrugged off the need for OPEC to intervene to stabilize markets.

Infact Saudi Arabia's Energy Minister Khalid al-Falih told that he does not believe any "significant intervention" in the oil market is necessary. His reported comments come ahead of an informal meeting of the OPEC in Algeria late next month, during which major oil producers are expected to discuss a potential output freeze.

WTI crude prices ended Friday's session at $47.64 a barrel, up 0.65% on the day, but it dipped 1.81% for the week, snapping a three-week win streak.

In the week ahead, oil traders will be focusing on U.S. stockpile data on Tuesday and Wednesday for fresh supply-and-demand signals.

WTI Oil ChartPivot: 46.43Support: 46.43 45.81 45Resistance: 47.96 48.5 49.35Scenario 1: long positions above 46.43 with targets @ 47.96 & 48.50 in extension.Scenario 2: below 46.43 look for further downside with 45.81 & 45.00 as targets.Comment: a support base at 46.43 has formed and has allowed for a temporary stabilisation.

US 500

U.S. stocks ended modestly lower after a volatile session on Friday, having bounced between gains and losses as investors wrestled with the likely timing of a U.S. interest rate hike following comments from top Federal Reserve officials.

The S&P 500 rose after Fed Chair Janet Yellen said the case for raising rates had strengthened but did not indicate when the Fed would act. But all the stocks later traded lower, after hawkish comments from Fed Vice Chair Stanley Fischer raised the possibility of a rate hike as soon as next month.

For the day, the Dow Jones industrial average fell 0.29%, the S&P 500 lost 0.16% and the Nasdaq Composite added 0.13%.

In the week ahead, investors will focus on U.S. economic reports, with Friday’s nonfarm payrolls data in the spotlight.

US 500 Chart Pivot: 2120 Support: 2120 2042 1992 Resistance: 2220 2250 2350 Scenario 1: long positions above 2120.00 with targets @ 2220.00 & 2250.00 in extension. Scenario 2: below 2120.00 look for further downside with 2042.00 & 1992.00 as targets. Comment: even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

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